74Software (74SW) Q3 2024 TU earnings summary

Executive summary

• Q3 2024 revenue reached €112.4m, up 14.9% organically and 62.1% overall, driven by Axway and the first month of SBS consolidation.

• Nine-month revenue totaled €261.1m, up 7.1% organically and 21.5% overall, with strong contributions from both brands.

• Integration of SBS began in September, forming a new group with a focus on synergies, shared opportunities, and maintaining strong brand identities.

• Both companies have market-leading products, with Axway recognized in the Gartner Magic Quadrant for API management and SBS ranked highly for lending and digital banking solutions.

• The parent entity will be renamed 74Software, preserving Axway and SBS as core brands under the new structure, pending shareholder approval.

Financial highlights

• Q3 2024 organic revenue growth was 14.9%, with total revenue of €112.4m; SBS contributed €34.3m for one month.

• Nine-month group revenue reached €261.1m, up 7.1% organically and 21.5% overall.

• Axway's Annual Recurring Revenue (ARR) at end-September was €235.3m, up 9.4% year-over-year.

• Cash position at September 30, 2024, was €62.1m, with net debt of €236.0m due to the SBS acquisition.

• Subscription revenue grew 31.2% year-over-year in Q3, while maintenance revenue declined by 19.9%.

Outlook and guidance

• 2024 guidance targets revenue of €646m (Axway plus four months of SBS), with ambitions to reach approximately €700m in 2025 and over €750m by 2027.

• Operating profit margin targeted at 13–17% for 2025, aiming for over 17% by 2027.

• Free cash flow targeted at 10–15% of revenue by 2027, with net leverage ratio below 2.0x by end-2025 and below 1.0x from 2028.

• Organic growth guidance for the group is 2–4% annually, reflecting the combined business model.

• Estimated €15m run-rate cost optimization from 2025.